It’s Humpday, Here’s Some News You Can Use!

Good morning my credit union brethren. Here are some news items to ponder as you start your day.

The Wall Street Journal is reporting that consumer spending made solid gains in December fueling hopes that consumers will help strengthen the economy this year. According to the Journal, retail sales gained 0.2% in December and jumped 0.7% when auto sales are excluded. Considering that retail spending drives a little less than 70% of the nation’s economic output, this is, of course, good news.

I’m curious how many of you are seeing evidence of this spurt in consumer confidence in the activities of your credit union members, particularly given the persistence of high unemployment, but this skeptical view of the nation’s economic malaise may just reflect the fact that I haven’t had my second cup of coffee yet.Another day, another Empire State office holder calls it quits

Almost all of you will be meeting with newly elected officials in the year ahead. Plattsburgh Democrat Bill Owens announced that he will not be seeking re-election to the Congressional seat that he has held since 2009. Owens will go down as one of the luckiest or craftiest politicians in the history of New York State. In 2009, he made national news when a divide within the Republican party helped him become the first Democrat to hold the seat since the Civil War. His Departure gives the Republicans a prime opportunity to pick up an open seat and you don’t have to be Charlie Cook to expect an awful lot of national money being poured into the race.

Owens joins Long Island Congresswoman Carolyn McCarthy (Democrat), who recently called it quits. It will be interesting to see if McCarthy’s departure triggers a new round of political musical chairs. Republican Lee Zeldin from Long Island has already indicated that he is foregoing another term in the State Senate to run against Congressman Tim Bishop. Zeldin’s departure coupled with the recent retirement of Senator Charles Fuscillo means that the battle for control for the State Senate where Republicans combined with an independent caucus of four Democrats to control the chamber promises to be the biggest political fight of this election cycle.

Incidentally, not all the departures have been completely voluntary. Earlier this week, Bronx Assemblyman Eric Stevenson lost his seat after he was convicted of taking $22,000 in bribes. This followed on the heels of Assemblyman Dennis Gabryszak resigning under pressure following accusations of sexual harassment. There are now eleven open legislative seats.

Tales of QM Mortgage Woes

Yesterday, the concerns of credit unions and community banks regarding the qualified mortgage regs were highlighted at a hearing of the House Financial Services SubCommittee on Financial Institutions and Consumer Credit. Speaking on behalf of NAFCU, Orion FCU CEO Daniel Weickenand, explained in his testimony that “when you take into account the additional legal liability associated with non-QM loans, this margin will be even narrower. While some institutions may start charging a premium on their loans to account for the additional risk associated with non-QM’s, we do not feel that this is in the best interest of our credit union, our members, or our community. Consequently, we have decided to cease to offer non-QM loans at this time.”

Reasonable minds can, of course, differ and I wholeheartedly agree that Congress should consider extending greater QM relief for credit unions and smaller lending institutions. In addition, each credit union has to make its own decision based on its own unique circumstances. However, I’ve said it before and I’ll say it again: before your credit union starts exclusively offering QM mortgages, do an analysis as to whether or not the cost associated with the perceived risk of potential legal liability are outweighed by the loss of credit union revenue from refusing to do perfectly legal non-QM mortgages.